Farmland Values: What's In Store Past 2014?

The past decade has been kind to farmland values. But what lies on the road ahead?

Commodity prices have taken a noticeable dip this past year. Will farmland values follow?

That question has been on a lot of minds in the agriculture industry. Researchers at the University of Illinois Department of Agricultural and Consumer Economics decided to take a closer look.

Nationwide, farmland value is an estimated $4,234 per acre. That number has risen by 44% during the past decade. Farmland values vary by state, but the upward trend has been consistent. Several Corn Belt states, including Illinois, Indiana, Iowa and Minnesota, have seen farmland values double or more during the past decade.

But will the upward swing continue? Farmland prices have seemed to stabilize during the first half of 2014, based on reports from entities such as the Chicago Federal Reserve Bank, the Agricultural Finance Monitor, Purdue Universities and others.

"While not identical, none of the reports indicate large changes in farmland prices in the first six months of 2014," the researchers note.

The researchers say a drop in cash rent is likely, especially through 2017, although a return to higher commodity prices would relieve this pressure. What’s not likely to happen is a decrease in farmland values, the researchers add.

"The drivers of large farmland price increases from 2006 to 2013 have likely eased," they write. "However, that does not mean that farmland prices will decrease. We may enter a period of more stable farmland prices. Shocks to interest rate markets could result in farmland price decreases, along with pressures generally on other assets as well. Over the next several months, watching actions of the FED and reactions in debt markets could be telling for the direction of farmland prices in the future."